Description

This paper analyzes the causal impact of macroprudential policies on growth, using industry-level data for 93 countries in order to overcome reverse-causality issues. I find that macroprudential tightenings have a negative impact on manufacturing growth, especially in the long-term and for industries with high external finance dependence. This impact is stronger in periods of higher growth and for advanced economies. However, macroprudential tightenings, especially capital supply measures, also contribute to a reduction in the long-term growth volatility, with a larger impact in financially dependent industries. The policy trade-off between higher growth and lower volatility is substantial, especially for advanced economies.